An investor perspective on fuel cells: past and futureDr Robert Trezona, Head of Cleantech, IP Group

1.Who we are

2.History

3.Sector thesis

4.Priorities for the (UK) sector

Agenda

IP Group is a patient capital investor in “deep technology”

Technology from universities, initially UK, now international

20012014 2016

68

39 39 38 37 3631 31 30

27 25 2320

18 17 17

UK cleantech venture investment totals by investor, 2012-2017 [£m]

Sources: Cleantech Group i3 database; IP Group analysisNote: ticket sizes estimated from overall round size where not published

IP Group is the leading investor in UK cleantech companies

• Invest between £100k and £10m

• 20 companies in current Cleantech portfolio

• Includes 20% stake in Ceres Power

Our team has worked with a number of UK fuel cell/H2companies

Current investments

1.Who we are

2.History

3.Sector thesis

4.Priorities for the (UK) sector

Agenda

Referencing: the Gartner Hype Cycle

Sources: Fuel Cell Today, E4Tech

2000 2018

1998

$750m

Ballard

2004

ITM IPO

2004

Ceres IPO

2005

Voller Energy

IPO

2005

CMR IPO

2006

Oxford

Catalysts IPO

2007

AFC Energy

IPOFinancial

crisis

2009

Steven Chu

“Four

miracles”

2010

Tesla

IPO

2010

Solar below

$1/Watt

2011

Bloom 200 kW

Energy Server

2011

Stationary

market doubles

2012

POSCO Fuel

Cell Energy

deal

2013 Ene-

Farm hits

100,000 units

2015

Mirai

launch

2016

h21

Leeds

2017

Plug Power

Amazon

2018

Weichai: Ceres

& Ballard

2018

Nicola 800 order

Anheuser-Busch

Fuel cells have come through the complete investment “hype cycle”

Referencing: the Gartner Hype Cycle

Sources: Fuel Cell Today, E4Tech

Hype stage

X Pre-revenue IPOs

X Hardware tech ignorance

X Lack of markets

X Small volumes, high costs

X Limited environmental action

Realism stage

✓ Corporates as funders

✓ Realism on timescales

✓ Market pull

✓ Product sales learning curve

✓ Urgent action on air quality

We have learned a lot…

US

UK

…but the sector is still not offering great returns

Average return over 5 years: -13%

Bloom Energy

-29% since

July IPO

Market cap down by $460m

1.Who we are

2.History

3.Sector thesis

4.Priorities for the (UK) sector

Agenda

1) Air quality concerns are the catalyst

2) Batteries cannot do it all

3) Hydrogen will be essential to displace fossil hydrocarbons

4) Cheap renewable electrons unlock an electrochemistry revolution

5) Electrochemistry talent and technology in universities and IP companies

6) Corporates can partner with technology providers to achieve scale

Our investment thesis for the sector

1) Air quality concerns are the catalyst

$10 billion settlement in the US alone

Paris gasoline and diesel ban from 2030

Oxford zero emissions zone from 2020

Shenzhen all 16,000 buses electric

The post-combustion age is coming

• 800 kWh

• 6000 kg

• 30 min charge = 1.6 MW

• 2500 A (!)

• Degrade $152,000 asset

• $190 per marginal kWh

• 2x 114 kW FCs + H2 tank

• <2000 kg

• 5 min charge

• Total drivetrain <$100,000

• $12 per marginal kWh

2) Batteries cannot do it all

Source: Tesla press releases, Bloomberg, Toyota

90

90

100

80

420

60

x7$1.7 trn

Trucking + cars

2015 Residential heating

Total2100

Iron + steel

Shipping(NH3)

ETC scenario to 2100Million tonnes

Shell Sky Scenario to 2070Million tonnes

x13$3.2 trn

800

2015 Total2070

Source: Energy Transitions Commission, Mission Possible (2018); Shell Sky Scenarios (2018)

60

3) Hydrogen will be essential to displace fossil hydrocarbons

2018 2018

Others…

4) Cheap renewable electrons unlock an electrochemistry revolution

Onshore wind

3225

0

10

20

30

40

50

60

70

80

90

100

110

2010 2015 2020 2025 2030 2035 2040

Solar PV, Utility scale, LCOE, $/MWh in favourable conditions

1817

0

10

20

30

40

50

2010 2015 2020 2025 2030 2035 2040

Wind (onshore), LCOE, $/MWh in favourable conditions

Utility-scale PV

Source: Lazard (2018); McKinsey; Energy Transitions Commission

Electrolyser-SMR breakeven at 70% efficiency

Electrolyser-SMR breakeven at 70% efficiency

5) Electrochemistry talent and tech in universities & IP companies

Not and exhaustive list. Omissions accidental.

6) Corporates can partner with technology providers to achieve scale

Weichai

Weichai

Broad Ocean ABB Audi

Air Liquide

Amazon Linde

Bosch

Source: E4Tech Fuel Cell Industry Review; Company websites; public market announcements

1.Who we are

2.History

3.Sector thesis

4.Priorities for the (UK) sector

Agenda

Current issues for UK hydrogen and fuel cell commercialisation

Source: E4Tech Fuel Cell Industry Review; Company websites; public market announcements

• Limited domestic market

• Lack of interest from UK government

• Brexit

• Supply chain

• Media and public awareness

Priorities from the investment perspective

Source: E4Tech Fuel Cell Industry Review; Company websites; public market announcements

• Double down on UK science strength

• Development of numerical tools “digital electrochemistry”

• System-level focus on efficiency (not cost)

• Export market: clean fuel and clean transport

• Domestic market: distribute generation on grid (reinforcement)

EPSRC, UKRI

Companies, Universities

• Mission Innovation & Faraday UKRI, BEIS

Companies (Universities)

Cities, corporates

DIT, Asian corporates

Overall summary

corporates

&

technology

export